Here's my summary of the key events overnight that affect New Zealand with news the US Fed has delivered the expected December +25 bps rise in its official interest rate.
The rate has been raised to 1.50% and have signaled that three more similar rises are due in 2018 taking the Fed Funds rate to 2.25%. Remember, two years ago it was at just 0.25%. This is a relatively dovish statement and the UST 10yr yield fell on the news. The USD also retreated. No mention was made of the impending fiscal stimulus from Congress's corporate tax cuts and the impact that may have on inflation, but it did raise its estimate for GDP growth in 2018 to +2.5% from +2.1%.
Meanwhile, underlying American inflation fell in November to +2.2% pa, on lower healthcare costs and the biggest drop in clothing prices in nearly twenty years. This is the sort of data that could impact the pace at which the Fed raises interest rates next year.
At the World Trade Organisation meeting in Argentina, the US, Japan and the EU issued a joint statement aimed at China, criticising it for requiring foreign firms to transfer technology to locals, and for subsidising its industry. China is sure to bridle at the accusations as it wants to be declared a "market economy" at the WTO and this seems less likely now. Essentially, the "market economy" status allows China to use its own local prices in defending anti-dumping cases brought against it in the WTO disputes framework.
In Sydney, the Austrac legal action against CBA is moving along with the bank filing its defense position. It admitted it was late in submitting some suspicious-transaction reports but will contest most of the other charges.
Moody's has published a review of the state of banks in the Asia-Pacific region and they say ours are in a stable position. They flag the possibility of declining profitability as a risk. In Australia they see the risk in declining asset quality - although they say the Aussie bank's capital improvements will be a positive. New Zealand bank asset quality and capital support are seen as 'stable'. New Zealand and Australian banks are noted as "an exception" because of the high reliance on wholesale funding.
In New York, the UST 10yr yield has slipped back to 2.36% after the Fed announcement.
The price of crude oil is lower again today, now just under US$57 / barrel, while the Brent benchmark is down to just under US$62.50. In an updated OPEC report, they said member oil production fell to its lowest in six months. But American production was surging faster than expected, meaning oil markets may not rebalance before the end of next year.
The price of gold is up+US$7 to US$1,245 oz.
The Kiwi dollar higher and up about ½¢ at 69.9 US¢. And on the cross rates we are holding up too at 91.9 AU¢, and against the euro at 59.4 euro cents. That puts the TWI-5 up further to 73 and its highest since NZ First chose the Labour Party as the election winner.
Bitcoin is now at US$15,985 and down -7% from this time yesterday. And this is a useful review of what central bankers think about bitcoin. The views are diverse,
If you want to catch up with all the changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».